It does not mean that the pound here in Britain, in your pocket or purse or in your bank, has been devalued." Prime Minister Harold Wilson

The only alternative, he said, was to borrow heavily from governments abroad - but the only loans on offer were short-term ones.

The government inherited an £800m deficit from the Conservatives when it was elected three years ago.

Mr Wilson said Labour had managed to reduce the deficit, but the cost of hostilities in the Middle East, the closure of the Suez Canal and the disruption to exports through the dock strikes had contributed to the strain on sterling.

He said: "Our decision to devalue attacks our problem at the root and that is why the international monetary community have rallied round.

"From now the pound abroad is worth 14% or so less in terms of other currencies. It does not mean, of course, that the pound here in Britain, in your pocket or purse or in your bank, has been devalued.

"What it does mean is that we shall now be able to sell more goods abroad on a competitive basis."

Defence cuts

The government hopes a boost for British exports in turn will lead to increased production and more jobs at home.

The bank lending rate has been raised to 8% and there will be cuts of £100m in defence spending and in some capital expenditure programmes.

Although there are likely to be increases in the cost of some goods imported from abroad, such as certain foods, the government hopes this will not feed into excessive wage demands.

Conservative leader Edward Heath has also appeared on television to reply to Mr Wilson's broadcast.

He accused the Labour Government of failing in one of its foremost duties - to safeguard the value of the country's money.

He said: "Having denied 20 times in 37 months that they would ever devalue the pound, they have devalued against all their own arguments."

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